B-105954, JANUARY 11, 1952, 31 COMP. GEN. 268

B-105954, JANUARY 11, 1952, 31 COMP. GEN. 268

CONTRACTS - PRICE ADJUSTMENTS - FLUCTUATING LABOR COSTS - SUBSISTENCE AS PART OF WAGES UNDER A CONSTRUCTION CONTRACT ESCALATOR CLAUSE, PROVIDING FOR A PERCENTAGE ADJUSTMENT TO COMPENSATE THE CONTRACTOR FOR CHANGES IN THE COST OF LABOR, EITHER UPWARD OR DOWNWARD, WHICH ESTABLISHES SPECIFIC HOURLY WAGE RATES TO BE USED AS A BASIS FOR DETERMINING THE AMOUNT OF ADJUSTMENT, SUBSISTENCE PAYMENTS MADE BY THE CONTRACTOR TO CERTAIN CLASSIFICATIONS OF ITS MECHANICS AND LABORERS MAY NOT BE CONSIDERED A PART OF WAGES IN MAKING ADJUSTMENTS UNDER THE CONTRACT ESCALATOR CLAUSE.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF THE INTERIOR, JANUARY 11, 1952:

REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 4, 1951, REQUESTING AN ADVANCE DECISION AS TO WHETHER THE ITEM OF SUBSISTENCE MAY BE INCLUDED AS A PART OF THE WAGE INCREASE AUTHORIZED TO BE PAID FOR THE SERVICES OF SKILLED AND UNSKILLED LABOR UNDER PARAGRAPH 18 OF SPECIFICATIONS NO. 1130, INCORPORATED INTO CONTRACT NO. I2R-15725, DATED JANUARY 15, 1946, WITH THE UTAH CONSTRUCTION COMPANY, COVERING THE WORK OF CONSTRUCTION OF THE DAVIS DAM AND POWER PLANT PROJECT, ARIZONA-NEVADA.

PARAGRAPH 17 OF THE SPECIFICATIONS CONTAINS A SCHEDULE OF THE PREVAILING HOURLY WAGE RATES AUTHORIZED BY THE SECRETARY OF LABOR TO BE PAID FOR THE VARIOUS CLASSIFICATIONS OF LABOR EMPLOYED IN THE WORK OF THE PROJECT. THE ESCALATOR CLAUSE RECITED IN PARAGRAPH 18 OF THE SPECIFICATIONS PROVIDES FOR A PERCENTAGE ADJUSTMENT TO COMPENSATE THE CONTRACTOR FOR CHANGES IN THE "COST OF OR," EITHER UPWARD OR DOWNWARD, IN CONNECTION WITH WORK PERFORMED "MORE THAN 180 DAYS AFTER THE DATE OF THE CONTRACT," AND, FOR SUCH PURPOSE, PARAGRAPH 18 AUTHORIZED THE USE, IN THE ORDER THEREIN DESIGNATED, OF ANY ONE OF FOUR ALTERNATIVE BASES INDICATED, BEGINNING WITH "THE RATE PER HOUR" SPECIFIED IN PARAGRAPH 17 OF THE SPECIFICATIONS FOR EACH OF THE SEVERAL CLASSIFICATIONS OF LABOR THEREIN LISTED. IN THE EVENT SUCH BASIC WAGE RATES COULD NOT BE UTILIZED, PROVISION WAS MADE FOR AN ADJUSTMENT BASED UPON THE HIGHEST AUTHORIZED RATE IN EFFECT ON THE DATE OF THE CONTRACT ESTABLISHED FOR SUCH LABOR CLASSIFICATION IN THE AREA BY ANY FEDERAL LABOR AGENCY; OR BY AGREEMENTS BETWEEN LABOR UNIONS OR GROUPS AND CONTRACTORS; OR, FINALLY, FROM THE AVERAGE OF THE WAGE RATES PAID DURING THE FIRST SIX MONTHS DURING WHICH WORK WAS PERFORMED UNDER THE CONTRACT. THE SPECIFICATIONS FURTHER PROVIDED FOR THE ELIMINATION OF SUCH CHARGES AS ILLEGAL WORKING TIME, COMPENSATION INSURANCE AND OTHER "INDIRECT CHARGES OR TAXES" APPLICABLE TO THE CONTRACTOR'S PAY ROLLS, AND ALSO STIPULATED THAT NO ADJUSTMENT SHOULD BE MADE EXCEPT FOR WAGES PAID TO LABORERS AND MECHANICS FOR WORK PERFORMED AT THE CONSTRUCTION SITE. IN SUPPORT OF ITS CLAIM FOR REIMBURSEMENT OF SUBSISTENCE EXPENSES PAID TO CERTAIN CLASSES OF MECHANICS AND LABORERS ENGAGED UPON THE WORK OF THE PROJECT, THE CONTRACTOR CONTENDS, IN SUBSTANCE, THAT THE ESCALATOR CLAUSE CONTAINED IN PARAGRAPH 18, SUPRA, CONTEMPLATED ADJUSTMENTS TO COMPENSATE FOR CHANGES IN THE "COST OF LABOR" AND NOT MERELY FOR CHANGES IN THE WAGE RATE APPLICABLE TO EACH CLASSIFICATION OF LABOR, AND SINCE ITS NEGOTIATIONS WITH VARIOUS LABOR ORGANIZATIONS RESULTED IN CONTRACTS WHICH PROVIDED THAT CERTAIN LABOR CLASSIFICATIONS WOULD BE ENTITLED TO RECEIVE SUBSISTENCE AND TRAVEL EXPENSES, IN ADDITION TO THE ESTABLISHED HOURLY RATES, SUCH ITEMS SHOULD BE INCLUDED AS A PART OF THE ADJUSTMENTS AUTHORIZED TO BE PAID THEREUNDER.

WHILE IT IS CONCEDED THAT PARAGRAPH 18 OF SPECIFICATIONS NO. 1130 DOES PROVIDE, GENERALLY, FOR ADJUSTMENTS TO COMPENSATE FOR CHANGES IN THE COST OF LABOR, OF WHICH THE SUBSISTENCE PAID TO CERTAIN CLASSIFICATIONS OF LABOR POSSIBLY COULD BE REGARDED AS A PART, OBVIOUSLY THE INCLUSION OF THAT ITEM IN A CLAIM FOR ADJUSTMENT UNDER THE ESCALATOR CLAUSE REFERRED TO WOULD BE ENTIRELY INCOMPATIBLE AND INCONSISTENT WITH THE TRUE INTENT AND MEANING OF THE CLAUSE, AS WRITTEN. FOR EXAMPLE, THE ADJUSTMENT THEREIN AUTHORIZED WAS TO HAVE BEEN COMPUTED UPON THE BASIS OF 65 PERCENT OF THE DIFFERENCE BETWEEN THE TOTAL AMOUNT OF "WAGES" ACTUALLY PAID TO ALL MECHANICS AND LABORERS ENGAGED UNDER THE CONTRACT AND THE TOTAL AMOUNT OF THE "WAGES" THAT WOULD HAVE BEEN PAID IF COMPUTED AT CERTAIN BASE RATES TO BE DETERMINED IN ACCORDANCE WITH SCHEDULES WHEREIN THE WAGE "RATE PER HOUR" WAS STATED TO BE THE DETERMINING FACTOR. THUS, THE CONTRACT CONTEMPLATED THAT, IF PRACTICABLE, THE BASIC WAGE RATES PER HOUR SPECIFIED FOR THE CLASSIFICATIONS OF LABOR LISTED IN PARAGRAPH 17 OF THE SPECIFICATIONS WERE TO HAVE BEEN UTILIZED AS THE FIRST ALTERNATIVE IN DETERMINING THE AMOUNT OF THE ADJUSTMENT TO BE MADE AND, IN THE EVENT THAT SOURCE OF DETERMINATION WAS FOUND TO BE IMPRACTICABLE, THE PARTIES THEN WERE ENTITLED TO ADOPT ONE OF THE ALTERNATIVE METHODS THEREIN SPECIFIED, EACH OF WHICH WAS BASED UPON A SPECIFIC WAGE RATE PER HOUR FOR THE CLASSIFICATION LABOR INVOLVED. MOREOVER, THE PROVISION THAT NO ADJUSTMENTS SHALL BE MADE,"EXCEPT FOR WAGES PAID" TO LABORERS AND MECHANICS "FOR WORK PERFORMED" AT THE CONSTRUCTION SITE WOULD INDICATE A CLEAR INTENT TO RESTRICT SUCH ADJUSTMENTS TO PAYMENTS MADE FOR "WAGES" ONLY, WHICH TERM COULD NOT REASONABLY BE REGARDED AS EMBRACING SUCH ITEMS AS TRAVEL EXPENSE AND SUBSISTENCE, TAXES, COMPENSATION INSURANCE, OR ANY OTHER "INDIRECT" CHARGE ORDINARILY ASSOCIATED WITH THE CONTRACTOR'S GENERAL PAYROLL EXPENSE.

AS STATED IN YOUR LETTER OF OCTOBER 4, THE TERM "WAGES" HAS BEEN DEFINED LEGALLY TO MEAN COMPENSATION PAID A HIRED PERSON FOR SERVICES RENDERED, AND IS COMMONLY UNDERSTOOD TO APPLY TO COMPENSATION FOR MANUAL LABOR, SKILLED OR UNSKILLED, PAID AT STATED TIMES AND MEASURED BY THE DAY, WEEK, MONTH, SEASON, OR PIECE. SEE PACIFIC AMERICAN FISHERIES V. UNITED STATES, 138 F.2D 464, 465; HOUDEK V. GLOYD, 107 P.2D 751, 756; SWAIN V. KIRKPATRICK LUMBER COMPANY, 78 SO. 140, 141. ALSO, THE COURTS HAVE HELD THAT THE TERM "WAGES" IS NOT AS COMPREHENSIVE AS "EARNINGS," WHICH COMPREHENDS RETURNS FROM SKILL AND LABOR IN WHATEVER WAY ACQUIRED. SEE FIRST NATIONAL BANK V. BARNUM, 160 F. 245, 247; BURNS V. MAURER, 131 N.Y.S. 344, 345; WILLIAMS V. SORENSON, 75 P. 2D 784, 787. IN THE CASE OF BURNS V. MAURER, SUPRA, THE COURT EXPLAINED THE DISTINCTION BETWEEN THE TERMS "EARNINGS" AND "WAGES" AS FOLLOWS:

THE WORD "EARNINGS" EMBRACES A LARGER CLASS OF CREDITS THAN THE TERM "WAGES.' IT COVERS ALL COMPENSATION FOR SERVICES AND MAY EVEN INCLUDE EXPENDITURES, AS WELL AS LABOR; AND WHERE AN EMPLOYEE RECEIVES FIXED WAGES AND BOARD, THE BOARD IS A PORTION OF HIS EARNINGS. IN THIS CONNECTION, ATTENTION ALSO IS INVITED TO THE CASE OF REDDICK V. NORTHERN ACCIDENT COMPANY, 165 S.W. 354, 356, WHEREIN THE COURT RULED THAT WAGES, OR COMPENSATION GIVEN TO A HIRED PERSON FOR HIS SERVICES, DOES NOT INCLUDE OTHER INCOME.

WHILE THERE IS SOME AUTHORITY FOR THE PROPOSITION THAT LODGING OR OTHER FORMS OF SUBSISTENCE MAY BE INCLUDED AS A PART OF AN EMPLOYEE'S WAGES, IT IS OBSERVED THAT THE COURTS, IN SO RULING, WERE INCLINED TO GIVE EFFECT EITHER TO THE PARTICULAR STATUTES INVOLVED, TRADE CUSTOMS, OR SPECIFIC AGREEMENTS BETWEEN EMPLOYER AND EMPLOYEE WHEREIN THE INTENT TO INCLUDE SUCH SUBSISTENCE OR OTHER FRINGE BENEFITS CLEARLY WAS MADE MANIFEST. CF. SOCIAL SECURITY BOARD V. NIEROTKO, 327 U.S. 358; INLAND STEEL COMPANY V. NATIONAL LABOR RELATIONS BOARD, 170 F.2D 247; HARRIS V. LAMBROS, 56 ID. 88; FIRST NATIONAL BANK OF CHICAGO V. ROGERS, BROWN AND COMPANY, 284 F. 921; SCHUMANN V. CALIFORNIA COTTON CREDIT CORPORATION, 286 P. 1068, 1070.

INASMUCH AS THE TERMS OF THE SPECIFICATIONS INVOLVED ARE PLAIN AND UNAMBIGUOUS IN THAT THEY CLEARLY WERE INTENDED TO ESTABLISH SPECIFIC HOURLY WAGE RATES TO BE USED AS A BASIS FOR DETERMINING THE AMOUNT OF THE ADJUSTMENT AUTHORIZED TO BE PAID FOR THE SEVERAL CLASSIFICATIONS OF LABOR ENGAGED UPON THE WORK OF THE PROJECT, IT REASONABLY MUST BE CONCLUDED THAT THE SUBSISTENCE PAYMENTS MADE BY THE CONTRACTOR TO CERTAIN CLASSIFICATIONS OF ITS MECHANICS OR LABORERS DID NOT CONSTITUTE A PART OF THEIR "WAGES," WITHIN THE MEANING OF THAT TERM AS USED IN THE SPECIFICATIONS.

FURTHERMORE, EVEN IF SUBSISTENCE PAYMENTS COULD BE CONSIDERED AS WITHIN THE PURVIEW OF PARAGRAPH 18, IT IS UNDERSTOOD INFORMALLY THAT THERE WAS IN FACT NO INCREASE IN THE AMOUNT OF SUBSISTENCE PAYABLE TO THE LABOR CLASSIFICATIONS CONCERNED DURING THE CONTRACT PERIOD. IT IS CLEAR FROM A READING OF PARAGRAPH 18 THAT THE CONTRACTOR WAS TO RECEIVE ADDITIONAL COMPENSATION ONLY IN THE EVENT OF AN INCREASE IN THE LABOR COST OF WORK PERFORMED MORE THAN 180 DAYS AFTER THE DATE OF THE CONTRACT. IN OTHER WORDS, THE CONTRACTOR ASSUMED THE BURDEN OF LABOR COST CURRENT AT THE DATE OF THE CONTRACT AND THE RISK OF ANY INCREASES OCCURRING DURING THE FIRST SIX MONTHS OF THE CONTRACT PERIOD, AND WAS TO RECEIVE ADDITIONAL COMPENSATION ONLY FOR SUBSEQUENT INCREASES. THUS, IF THE SAME SUBSISTENCE PAYMENTS WOULD HAVE HAD TO BE PAID FOR SIMILAR WORK IF PERFORMED DURING THE FIRST SIX MONTHS OF THE CONTRACT, THE MERE FACT THAT NO SUCH WORK WAS ACTUALLY PERFORMED UNTIL A LATER TIME WOULD NOT MAKE SUCH PAYMENTS WHEN MADE AN INCREASED COST OF LABOR. NO SHOWING HAS BEEN MADE THAT SUBSISTENCE PAYMENTS OF $3 PER DAY WOULD NOT HAVE HAD TO BE MADE BY THE CONTRACTOR, OR, INDEED, THAT SUCH PAYMENTS WERE NOT ACTUALLY MADE FOR WORK DURING THE FIRST SIX MONTHS OF THE CONTRACT. IN FACT, IT IS UNDERSTOOD THAT AN AGREEMENT IN EFFECT PRIOR TO THE DATE OF THE CONTRACT BETWEEN THE IRON WORKERS UNION AND NINE MEMBERS OF THE ASSOCIATION OF GENERAL CONTRACTORS, NOT INCLUDING THE UTAH CONSTRUCTION COMPANY, CALLED FOR THE PAYMENT OF $3 PER DAY SUBSISTENCE FOR WORK OVER 40 MILES FROM HOME.

UNDER THE CIRCUMSTANCES, YOU ARE ADVISED THAT THERE APPEARS TO BE NO LEGAL BASIS FOR ALLOWANCE OF THE CONTRACTOR'S CLAIM FOR ESCALATION ON SUBSISTENCE PAYMENTS.